Abstract
A new CES (Bairam, 1989, 1991) production function that has the Cobb-Douglas and Leontief functions as special cases is considered and estimated. For the nondurable goods and durable-goods sectors in US manufacturing, the translog and CES functions cannot be estimated properly due to multicollinearity, whereas the Cobb-Douglas and new CES functions yield coefficients that have the correct sign and are significant at the 1% or 5% level. Both sectors exhibited increasing returns to scale, though the nondurable-goods sector is more efficient than the other sector. Although the Cobb-Douglas function cannot be rejected, the new CES functions has the maximized value of the log-likelihood function and the advantage that the variable output elasticity with respect to inputs can be tested.
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